Fed’s Warsh calls for new inflation measures, rejects Dallas Trimmed Mean PCE

Federal Reserve Chair Kevin Warsh has refuted claims that he favors the Dallas Fed’s Trimmed Mean PCE as the primary measure for inflation, advocating instead for the development of new metrics to better understand underlying inflation trends. Warsh’s remarks underscore a critical examination of current inflation measures, which he suggests may not fully capture true price pressures. His position comes amid inflation rates that significantly exceed the Fed’s 2% target, with the headline PCE at 4.1% compared to the 2.4% measure by the Dallas Fed’s Trimmed Mean PCE.

Markets have shown interest in Warsh’s statements, reflected in the pricing of scenarios related to potential Federal Reserve actions between July and October 2026. The likelihood of a change in interest rates appears to be influenced by Warsh’s call for new inflation metrics, suggesting market participants are weighing the possibility of adjustments in monetary policy. Current market pricing for a decision shift by the Fed during this period stands at 52% for a different outcome, indicating expectations that Warsh’s approach could lead to policy changes.

Key Takeaways

• Warsh’s comments appear to suggest a need for new inflation measures, beyond the Dallas Trimmed Mean PCE.
• Market pricing implies participants view potential shifts in Fed policy as consistent with Warsh’s recent statements.
• There is a 52% market-implied probability of the Fed deciding differently in the upcoming meetings.

What to Watch

Markets will closely monitor upcoming Federal Reserve meetings for any indication of changes in inflation measurement approaches or policy shifts. Key economic indicators, such as U.S. CPI or PCE data, will be critical in shaping expectations of potential rate cuts. Additionally, any future statements from Warsh or other Fed officials could further influence market dynamics and perceptions of the Fed’s policy direction.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.